Since election day delivered the realization that President Obama’s two terms in office would be succeeded by a Republican rather than a fellow Democrat, the Administration’s regulatory agencies have accelerated their efforts to cram through as many last-minute regulations as possible.
Nowhere has this effort been more focused than on the oil and natural gas industry.
Since November 8, we have already seen the following events take place:
Alaska Senator Lisa Murkowski, Chairman of the Senate Energy Committee, was outraged by DOI’s refusal to include the Arctic lease sales in its final plan. “Why the president is willing to send all of those benefits overseas is beyond explanation,” Murkowski said. “And it is even more stunning that just one day after urging the new administration to stand up to Russia, he continues to cede leadership on Arctic energy production to them.”
As President Obama demonstrated when he assumed office, this action by DOI is highly vulnerable to reversal by the incoming Trump presidency. In January 2009, the Obama Administration placed a “pause” in implementation of a five-year plan that had been finalized by the Bush Administration late in 2008, and reduced its number of planned lease sales by 25%. Unless Mr. Obama takes further action to make modification of this plan more difficult – as anti-development groups are pressuring him to do – the Trump Administration could take similar action and reinstate the Arctic leases sales next year.
The BLM rule on venting and flaring is also quite vulnerable. Because it was finalized so late during an outgoing administration, it becomes subject to the provisions of the Congressional Review Act, along with the myriad other regulations we can expect to be shoved through the process between now and January 20. It will be up to congressional discretion to determine which regulations are worthy of addressing in that manner.
The lease cancellations, however, would be far more difficult to reverse. The secretarial decision is essentially the final word on the matter, which means that the whole process would have to be started over again, beginning with a lease sale in the area being included in the DOI five-year plan. Predictably, no such lease sale exists in the DOI plan, and even if one did, it’s hard to see why any company would be willing to bid on the leases, given the uncertainty surrounding whether they would ever actually be able to get to the point of drilling a well.
That type of uncertainty, more than anything else, will likely become the Obama legacy when it comes to development of oil and gas resources on federal lands and waters. Federal leases in the U.S. used to be some of the most attractive assets any oil and gas producing company could own, in large part due to the high degree of predictability that formerly existed in U.S. law and policy governing such leases. This predictability gave the U.S. government a competitive advantage over other nations in its ability to reap the benefits from such leases in the form of lease bonus payments and federal royalties.
As that level of predictability has fallen over the last eight years, so has interest in participation in federal lease sales in general. Regardless, the Administration seems intent on casting this regrettable legacy in stone between now and January 20.
By David Blackmon
LinkedIn Twitter Xing EmailWhen I left my second large company experience to become President of a small manufacturing company I did so driven by ego; I fancied the title. Soon […]
LinkedIn Twitter Xing EmailFirm details on exactly how the U.K. will regulate new medicines is still to be decided after it leaves the EU later this year (caveats on timing […]
LinkedIn Twitter Xing EmailThe Simply Good Foods Company, the owner of Atkins-branded food products, has secured a deal to acquire protein snack maker Quest Nutrition for $1 billion. Quest, which […]